ESOS – 5 months to go

It’s almost five months to go before the end of the first phase of the Energy Savings Opportunities Scheme. Significant UK businesses will be required to identify energy saving measures and report these to a nominated board level Executive. Six months into phase one and the scheme has seen some significant milestones:

  • Assessors have undergone training and been assessed for their competence;
  • Clients have begun to participate in the scheme; and,
  • The Environment Agency have updated guidance to participants.

From Greengage’s point of view, we have been talking to our clients and contacts about how the ESOS legislation would impact their businesses since mid-2014, as well as being asked to act as their ESOS Lead Assessors.

In order to act as a Lead Assessor candidates must be able to cite suitable career episodes which meet the PAS 51215 Standard and then pass a formal examination set by an approved certifying organisation.

The exam itself is fairly straightforward, though when our Assessor sat their exam there was much talk about how the Environment Agency (the organisation in charge of ESOS) would recover their costs for acting as the ESOS scheme administrator. The Environment Agency don’t charge when organisations submit a notification of compliance which has led people to speculate how they’ll be funded during a climate of austerity.

It is suspected that the EA’s ESOS work will be funded through fines charged to organisations after the 5th December 2015 – the cut-off date for ESOS submissions of compliance. What this means is that businesses, who the EA will have notified of their obligations, that haven’t met their obligations will be fined and will continue to accrue fines until they have met their ESOS responsibilities.

The biggest challenge we have found has been to define the extent of our clients ‘auditable assets’. On the face of it this seems quite simple – business transport, processes and buildings. In reality we have to assess what would be classified as a process (for example, a building contractor who are constructing a building) and then factor in a dozen or more subsidiary and joint venture organisations that might be required to participate within ESOS as part of the parent corporate group.

A useful part of the Environment Agency update was how joint venture and subsidiary businesses would be tackled within ESOS. A further point to note is that an organisation, or some parts of a business group, that operates within the UK may be registered outside the EU (for example, a company registered on the Isle of Man) and therefore be exempt from the ESOS Regulations.

In terms of scoping our service provision we have adopted the Carbon Trust approach with three stages to acting as an ESOS Lead Assessor:

1.  Scoping the energy use/participation of the organisation;
2. Conducting the ESOS Audit programme & review previous audits; and,
3. Compiling the ESOS Evidence Pack for submission to the Board.  

One of the main things to appreciate about ESOS is that while compliance with the Regulations will avoid fines being applied to the business, there is an enormous opportunity for businesses to use the information generated for compliance to drive energy efficiency within their organisation. In fact the costs for compliance are likely to be quickly recouped should the organisation realise the opportunities presented to the board level executive. The ESOS guidance recognises two financial appraisal metrics that describe how opportunities are presented:

  • Simplified Payback Periods (SPP); and,
  • Life-Cycle Cost Analysis (LCCA), also known as Whole Life Costing.

SPP indicates the time taken (in months/years) for the energy/cost savings to recoup the initial cost of the proposal. LCCA, on the other hand, calculates the current cash benefit in £s, or Net Present Value, to the organisation as a result of the proposal being installed.

If you have any queries please contact iain.fraser@greengage-env.com